China Construction Bank

CCB offers yuan bonds in London

It is the first Chinese lender to offer the product in the West and an analyst says it is a sign Beijing is pushing to globalise its currency

PUBLISHED : Saturday, 03 November, 2012, 12:00am
UPDATED : Saturday, 03 November, 2012, 4:17am

State-owned China Construction Bank (CCB) is planning to sell up to 2.5 billion yuan of offshore yuan-denominated bonds in London, a sign that Beijing is stepping up efforts to internationalise its currency.

The mainland's second-largest lender by market value will issue the dim sum bonds through its London unit, CCBL Funding, a statement by Fitch Ratings, which is rating the bonds, said yesterday.

All funds raised will be used to develop CCB's offshore renminbi business and for other general corporate purposes, Fitch said.

The issue, the first by a Chinese lender, is to be launched this month, a report by Dow Jones said yesterday, citing unnamed sources.

CCB declined to comment.

In April, Europe's biggest lender, HSBC, sold 2 billion yuan of dim sum bonds in London, the first such issue in the city.

Ivan Chung, vice-president and senior credit officer of project and infrastructure finance at Moody's Investors Service, said CCB's bond issue is symbolic of the mainland stepping efforts to internationalise the renminbi.

"This is a sign that the mainland hopes more yuan-denominated products will be available in different markets," he said.

If the dim sum bond was issued in Hong Kong, most of the investors would be from the mainland, Chung said.

"I think CCB didn't choose Hong Kong as it wants the yuan-denominated investment product to reach more investors."

London has ambitions to be a Western hub for yuan trading.

David Wootton, Lord Mayor of the City of London, said in Hong Kong in September that the city supported development of the offshore yuan market with Hong Kong as a partner.

Chung expects CCB's dim sum bond to receive a warm response. After the European debt crisis, some funds are looking to boost their investment in the mainland and seeking low-risk products.

Fitch said in the statement that the proposed dim sum bond issue is expected to be rated A.

Taiwan could be the next market to attract companies wanting to issue dim sum bonds, Chung said.

"Many Taiwanese enterprises are holding a significant amount of yuan deposits," he said.

He is not concerned that London or other markets will challenge Hong Kong's position as an offshore yuan centre.

"Hong Kong still has its advantages in terms of location and the city started developing the dim sum bond market much earlier than London."

A report by the City of London in April said total yuan deposits in London reached more than 109 billion, while yuan deposits in Hong Kong amounted to 545.7 billion at the end of September, according the Hong Kong Monetary Authority.